http://www.morningstar.com/earnings/42254468-aeropostale-inc-aro-q2-2012.aspx

Aeropostale Inc ARO
Q2 2012 Earnings Call Transcript

Transcript Call Date 08/16/2012

Operator: Thank you for joining us for the Aeropostale Conference Call to review Second Quarter 2012 Financial Results. At this time, all parties are in a listen-only mode. Following the management's presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference call is being recorded.

I would now like to introduce Ken Ohashi, the Company's Vice President of Investor and Media Relations.

Kenneth Ohashi - VP, Investor and Media Relations: Thank you all for joining us this afternoon. With me here today are Tom Johnson, our Chief Executive Officer; Michael Cunningham, our President; and Marc Miller, our Chief Financial Officer. We issued a press release earlier this afternoon announcing our second quarter 2011 financial results. A copy of the release and corresponding presentation can be found on our corporate website.

Before we begin, I'd like to remind you that during this earnings conference call, certain statements and responses to questions may contain forward-looking information, such as forecast of future performance. Forward-looking information and statements involve known and unknown risks and uncertainties which may cause our actual results to differ materially from our forecasted results. Those risks are described in our Annual Report on Form 10-K and our quarterly reports on Form 10-Q, all of which have been filed with the SEC and are available on our website. We undertake no obligation to update or revise any forward-looking statements reflect subsequent events or circumstances. Listeners to this call are referred to those filings.

Before I turn the call over to Tom, I would like to ask everyone to limit themselves to one question during our Q&A session to allow everyone a chance to speak. Once we've gone through a round of questions, we'll go back and you may queue up again at that time.

I would now like to turn the call over to Tom.

Thomas P. Johnson - CEO: Thank you, Ken. Good afternoon, everyone, and thank you for joining us today. I'd like to take you through some of the highlights for our second quarter and then I'll turn the call over to Marc who will take us through the financials.

During the quarter, we focused on integrating fresh and relevant fashion into our assortment in addition to launching new and exciting marketing campaigns, communicating a stronger lifestyle message to our consumer.

Similar to the trends we experienced in the spring season, our girl customer continued to respond positively to (newest) in silhouettes, fabrics and details. We experienced strong sell-throughs in key categories such as fashion tops, colored and printed denim, wovens, and accessories.

In men's we continued to experience success with our broadened assortment, including short-sleeve knits and wovens. Overall, our fashion categories experienced positive comps and an improvement in our average unit retail and gross margins versus last year.

While we are encouraged by the customer response to our fashion that was supported by our broader marketing initiatives, our core basics business, which includes, graphics, polos, and printed camis, was under significant pricing pressure. As a result, we had to promote these businesses more aggressively than initially expected to end the quarter with inventories in line with our plan. Unfortunately, these competitive pricing pressures on our core basic business has accelerated into the early back-to-school season, and we believe that both our top line and margins will be under pressure for the remainder of the third quarter.

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